Postby TerryH » Mon Aug 01, 2022 12:20 am
Having digested the various replies I thought I would sum up.
The scheme I suggested would work if I borrow £1m from a bank and give it to my children rather than borrowing from my children the cash I lent them a few years earlier. I'd have to persuade the bank to lend to me and pay them interest.
The following scheme also works, at least according to professional pieces I have read on the internet:
(i) Give £1m to children.
(ii) Wait 7 years.
(iii) Children buy £1m house which I go and live in rent free.
(iv) Sell existing house and give away proceeds to children.
(v) Wait 7 more years.
It doesn't have to be £1m, it can be any sum and just to be clear, for someone with liquid assets, this affords a route to live in an expensive property til death without it being in one's estate at death either directly or the through some deemed reservation of benefit.
I was trying to achieve something similar using similar principles. However, having been pointed in the right direction by a helpful answer here and studied s.103 of the 1984 IHT Act, plus having read a few professional pieces on that, I can see that my scheme probably would not work at all. s.103 is quite pernicious. It will defeat artificial loans but also genuine loans. Plus there appears to be no time limit on the connection between a loan being made and it being tied to "property derived from the deceased" - in contrast to the above scheme where after 7 years, money gifted and subsequently used is not tied to one's estate.
So it is not worth getting and paying for advice on this scheme and thank you for saving me the effort.